Best And Worst Q4 2020: Utilities ETFs And Mutual Funds

The Utilities sector ranks tenth out of the 11 sectors as detailed in our Q4'20 Sector Ratings for ETFs and Mutual Funds report. Last quarter, the Utilities sector ranked tenth. It gets our Unattractive rating, which is based on an aggregation of ratings of the 69 stocks in the Utilities sector. See a recap of our Q3'20 Sector Ratings here.

Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the sector. Not all Utilities sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 20 to 216). This variation creates drastically different investment implications and, therefore, ratings.

Investors seeking exposure to the Utilities sector should buy one of the Attractive-or-better rated mutual funds from Figure 2.

Figure 1: ETFs with the Best and Worst Ratings

* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

Two ETFs (PUI, UTES) are excluded from Figure 1 because their total net assets are below $100 million and do not meet our liquidity minimums.

Figure 2: Mutual Funds with the Best and Worst Ratings

* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

FXU is the top-rated Utilities ETF and EVUYX is the top-rated Utilities mutual fund. FXU earns a Neutral rating and EVUYX earns an Attractive rating.

PSCU is the worst rated Utilities ETF and RYUTX is the worst rated Utilities mutual fund. PSCU earns an Unattractive rating and RYUTX earns a Very Unattractive rating.

In total, 69 stocks of the 2,850-plus we cover are classified as Utilities stocks.

The Danger Within

Buying a fund without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on fund holdings is necessary due diligence because a fund’s performance is only as good as its holdings’ performance.

Performance of Holdings = Performance of Fund

Analyzing each holding within funds is no small task. Our Robo-Analyst technology enables us to perform this diligence with scale. More of the biggest names in the financial industry (see At BlackRock, Machines Are Rising Over Managers to Pick Stocks) are now embracing technology to leverage machines in the investment research process. Technology may be the only solution to the dual mandate for research: Cut costs and fulfill the fiduciary duty of care. Investors, clients, advisors and analysts deserve the latest in technology to get the diligence required to make prudent investment decisions.

Figures 3 and 4 show the rating landscape of all Utilities ETFs and mutual funds.

Figure 3: Separating the Best ETFs From the Worst ETFs

Sources: New Constructs, LLC and company filings

Figure 4: Separating the Best Mutual Funds from the Worst Mutual Funds

Sources: New Constructs, LLC and company filings

This article originally published on Oct. 13, 2020.

Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, style, or theme.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.